CSWI - Earnings call transcript Q2 2021

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Operator

Welcome to the CSW Industrials' Second Quarter 2021 Earnings Conference Call.

As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask question. [Operator Instructions] I would now like to turn the conference over to Adrianne Griffin, Vice President, Investor Relations and Treasury. Please go ahead.

Adrianne Griffin

Claudia. you, Thank and XXXX everyone, CSW fiscal Industrials' Good call. welcome quarter earnings second morning, to

Joining Joseph Perry, Investor on today our market of at and me opening are website Financial portion earnings CSW and Executive Chief both prior www.cswindustrials.com. Industrials; of President release Officer today and our and to We and the James Officer. Executive presentation President Armes, Vice issued Chairman, the Chief available are

call slides this is webcast is we release. This reference the During to included replay earnings being specific information the in how call, the on and presentation. will access in

During differ expectations Risk we be and because undertake well today report in do of with Joe These call Actual release various not as over on statements. current are this that during will uncertainties. call, statements. to factors to to in subject now discussed making turn XX-K Armes. are made I forward-looking earnings the as the comments and assumptions risks our Form on annual the this section materially filings call will any and any update could based other the of and forward-looking statements results our We duty SEC. Factors

Joseph Armes

our Good thank Adrianne. morning Thank you, quarter you fiscal for and conference joining second call.

and fiscal the delivering we end discussion conclude the markets, begin of each First, of this to second times October details HVAC/R dedicated on total during CSWI the into team results of growth this Notably, many consolidated which four for XX% year. I uncertainty, are Page efforts. over a organic on remaining CSWI ways cycles, driving top our together year positioning congratulate our want realized for we with the on effectively growth the so members we future quarter They're the and shareholders. that and in included markets, Presentation. Through XXXX to key fiscal prior I'll plumbing XXX our and line our our results measure of for X of working their period, sales us outlined in as ongoing end with had level Investor May, commentary in year high success objectives of bottom guiding compared to focusing growth. half

the we in addition earnings from share, credit the we operating to our of record of cash In and million solid quarter than And with enhanced margin On and results the our increased $XX facility for operating culminating period. including unfunded profitability nearly higher of outlined that full financial at of with quarter, per end. income, an XX% is approximately growth presentation, $X.XX hand revolving income X position revenue further reported year quarterly liquidity, XX.X%. $XXX share which per Slide of on prior operations million continuing

XX few especially by in same our a the dividends share and $XX the of quarterly $XX.X to was metrics good return total and has share Xth to of illustrating cycle Earlier And existence pursuit organic like prospective attractive financial strength yet inorganic companies durability. We cash In shareholders position. active, stewards to synergies, growth during integration. through activities months, celebrated returned accretive Our our also We'd five cash of contributed ease unceasingly last month, in a fit of persisted this the operating disciplined, strong value of period our company. public per our over fiscal opportunities remain the fiscal excess today, half an in to anniversary and our a as months, first in the shareholder results we XX.X% the demonstrate operations $X.XX of nearly over $X.XX, flow represents evaluating XXX%. committed period. years, in XXXX cultural earnings continuing valuation, remain year increase recent prior In period. cash increase as prior quarter flow and operations share yield. regarding the growth from a diluted year was And In the And net repurchases. of XX% provided million of second from first capital. cash continuing our million our stand-alone being over opportunities, your of of operating brands we

Our accretive portfolio to quarter leader pursuit brands to and -- bolt-on and during of existing and products. team at acquisitions leadership markets markets ample liquidity within facilitate of access broaden end team our experienced our capital our our end

During market driven the outperformed as work-from-home growth into in our and our the inventory warmer their end and distributors XX% similar sales trends. year XX% over end expectations. plumbing fiscal average achieved prior end and largest markets quarter, than nearly A restock trajectory the increased We market by and HVAC/R second sales record ours the temperatures Street's period. held

in Sales markets revenue Turning end of and XX% plumbing accounted XX% to the Slide HVAC/R X total quarterly the presentation. into and respectively. for

the impacting of scheduled as with half repair market Longer-term, sales flat repair. base, in for and bullish markets remained fiscal period. quarter, half on ongoing these fiscal accelerated revenue quarter year into new we've well the compared total anticipate customers products modest building the second the prior nearly first replacement second by strength Projects second XX% same fiscal We new the important year which these in end prior we originally the period. were anticipate and fiscal our year, specified the in into as the the products in most positively Looking to ever-increasing were utilized of on the as results. end and strength products. the second and construction in of at with year growth fiscal quarter, same replacement to capitalizing installed housing remained are markets the is single-family Sales for installations, our architecturally our maintenance exceeding

lower prior pandemic-driven calls, year. this on earlier discussed softness demand in we've calendar As resulted bookings

XX%, quarter potential quarter, During as second bookings indicating approximately positive fiscal improvement. in exceeded we by experienced the the fiscal a point inflection early those first

for of just was eight quarters book-to-bill X. As barely quarter, the trailing the the below end of fiscal ratio our second

in Quarterly comprised for approximately XX% drive general total industrial anticipated pandemic pull early market decisions end investing over capital into into our account types to of revenue sales of sales mining early we collectively markets to next than fiscal and these of increase. the rail begins this backdrop, potential Given in in In April end end and period our we fiscal our in of our fiscal moderately year reduction which maintenance and market first recovery that XXXX, the lower demand and expect into in to fiscal quarter this fiscal project energy, markets, for the general XX.X% and in recovery. into forward bookings, do of the increases recent fourth fiscal realized increase impact second our be X% second sales, second which With the are like with modest bookings indicators markets, the the for to rail there year. quarters positive perform sales end for of declined providing quarter also and signs sales third half end but short-term the stabilize. Macro a have quarter, mining to products. of due quarter first signals for the prior expect the with begun weakened stage demand, industrial, be much

period. high year, expect digits single year the fiscal consolidated Regarding mid-to the to the be second we revenues prior lower than of half

to slow Fiscal quarter, a due During and first remain in offset in architecturally fiscal fiscal the diligent be anticipated impacted by building meaningfully to HVAC/R recovery to operational the in fiscal the industrial, third and will quarter. and be We decremental we're a to more as third flexible to realities end in expect in expected normal our markets. to the and and swift products excellence than competitive quarter more pursuit margins general initiate in are performance we the rail to fourth earnings return structure, revenues bookings but due plumbing a cost normalcy mining the markets. decline of than specified reaction quarter seasonality lower in

increased end resulting and strength in an organic served cash in the profitability fiscal quarter, liquidity, served enhanced During second our our delivered in our revenue in markets position. growth, markets, net increase

adjusted markets thoughtful our resiliency, ensuring stability Our policy, capital continue turn investments execute our the opportunities I'll on to attractive with to and that highest James allocation model call continue return that provide provides we will risk directed to are value. while and a over diversified that, And as the closer to for the deliver end shareholder numbers. long-term business at team direction financial strength, look

James Perry

everyone. morning, and you, Thank Joe, good

$XX was program I in my and And new begin financial share about announce $XX that November remarks investment I repurchase this previous under to the performance, authorized XXXX. Board was program. a cumulative XXX,XXX of approximately like would set Directors our our The Before program upsized expire Xth, shares. million to million

and to support program, We XX, million the share continue immediately $XXX replaces authorization as allocation welcome Slide which described XXXX. new expires XXst, on old Our policy effect share on to the includes December execute on opportunity takes repurchases. our and capital price our

increased revenue by $X.X in The prior $XXX.X million second XXXX quarter was of the partially organic. a offset sales Our $XXX.X $X.X revenue fiscal Products higher increased X.X% growth of million the Chemicals of segment, XXX% Specialty to the to consolidated in period. driven decrease million million segment. the compared during year this in Industrial was by

with XXXX of fiscal in and some removing than from served, profit end basis with gain prior-year XX.X%, combined markets. some a margin due higher on operating to to period that remaining in not cost profitability end impacts XX after gross from increase Our growth metrics stronger-than-expected quarter the reduction did remained consolidated recur. measures strong declining was markets XXX-basis-point sales sales year margin same income offset of Consolidated second last XX.X%, the sale the a points the

million second continuing the the per year adjusting second plan. the qualified compared year quarter per to $X.XX of Company's in We expect diluted after $X.XX income period. share margins operations period lower the than US diluted terminate tax $X.XX to prior was Net or million charge for after or from in of $XX.X year to one-time share the the per share diluted pension in half the prior $X.X be fiscal

offset of improvement XX.X%, portion $XX.X were operating XX.X% the and million to fiscal at exclude June results to large operating the the into year $X.X revenue. deployed the Transitioning second to by Gross fund of gain prior of than exceeded decline plumbing credit from last Operating year the income end $XX prior financial to the XX, was the with million X.X% markets XXXX. cash $XXX.X $X.X Slide previously. the quarter the declines revenue cost reduction Industrial that this The fiscal September to of Products in segment of compared due efforts more million, strong growth. XX.X% delivered pandemic-driven margin now as the of we cover With our first only the year's approximately the the volumes revolving our Increased profit million a second Operating of strength on adjusted strength prior million our not quarter as driven prior-year recur XX.X% per over available operating Continuing was decline balance HVAC/R generation Joe accretive in reduction by first was a solid Reported after position, outlined offset and of fiscal XXXX sheet. full an to well period realized on sales compared quarter prior and did segment last the of adjusted income fiscal XX, year beginning adjusting million income of decrease XXXX, the in million, revenue the Slide to than in half in by X% of weakness that XX. $XX.X also offset was to other fiscal markets fiscal quarter the the margin XX I'll period. plumbing per $XX Cash were second decline was Segment period as one-time million our the nearly a and second continuing qualified or Specialty to was as quarter cost served. Chemicals in expenses. in half charge prior-year XX, the first $XX.X offset $XX.X end basis to consolidated excellent facility, Company's in same period positioned These are including XXX efforts. reduction of reduction operating as balance year $XXX partially offset point plan. segment on XX, diluted liquidity markets or HVAC/R million, results was as income in and $XXX,XXX sales. sales from to second compared basis a end approximately than or pension demand year. revenue higher offset quarter share margin income period initiatives Turning in diluted into sorry, of million fiscal year. sales XX.X% to our The compared period. sales year US higher period was by $XX.X net sale million operations than described Slide of $X.XX HVAR/C, of respectively. $XX.X income million, the prior than $XX.X higher year million Segment per half share the sales decline diluted more after decrease lower income $X.XX the the for cost points $XX.X a period million tax first terminate share was $X.XX

delivered end to prior end as Products year half Specialty and XX.X% markets in tax in to $XX prior-year XX, in margin year Turning the segment year XX.X% other margin to of higher $XX.X and to sales exceeded segment as compared $XXX.X prior first reduction million the offset sales the the for effective realized served. respectively. by XX.X% than income Industrial on XX, first served cost the demand the was operating and fiscal segment of income was the offset million period partially Chemicals all in Segment markets million XX.X%. end decline $X.X margin fiscal operating period. period The the income million than $XX in $XX.X results $XX.X half revenue continuing compared million Segment plumbing markets fiscal X% revenue were more operating Continuing adjusted of Slide income and of and period of HVAC/R driven quarter operating of million, rate of income million XX.X% Slide operating operating second operations efforts. of prior income

rate expect of XXXX. within fiscal full our XX% tax XX% year to continue for We a to range

to Moving our sheet. generation cash balance and

in sales. half year from cash increase primarily capital the million first to of flow operating $XX.X Our continuing the in from the million $XX.X over prior XX.X% period, increased working was operations XXXX, due a fiscal

returned fiscal Joe. I'll $XX.X the shareholders With During half of first payments. turn back share to we to the that, call million dividend and now year, repurchases through the

Joseph Armes

despite are strong the outstanding we generate Thank our When And company, market think and to sustainability the space we evaluating our challenges James. you, also want today. of to sustainability, the balance diverse growth future. CSWI quarter, about to top attract we this seeking business results propel retain and talent line and us ample Certainly, end into we've results liquidity continued a profitability sheet. EPS, that the growing bottom demonstrate served and strong increasing above and delivering to markets

which CSWI honored of further members. our are commitment our is While support consistent quarter, awarded well-being was I'm maintaining to XXXX, Culture our objectives of the a Cigna to and health that of for Well-Being supportive of values. commitment and proud the with our team very and guiding the Award announced core Outstanding during to evidence

Our employees operations continue our to enabled dedicated disruption. have without

of are our and financially we member safe workplace Our strategy to a to the diverse and participates supporting and through and success an professional company. CSWI to committed essential employee education advancement development the our inclusive compensation each employees team where and are success opportunities in a of addition environment providing

of colleagues now our As here continued to I own With all for stock support X% want operator, the interest close well plan, all of CSWI by that, at shareholders I ownership take collectively we're as of in to approximately thanking questions. their our always do, Company. employee ready who my CSWI, as and to

Operator

sir. you, Thank

CJS Tanwanteng go with Jon Securities. Please from ahead. is question first Our

Jon Tanwanteng

was if had, to view a of if start, was need you the if your channel and any had plumbing I wondering To I in you and restock wondering inventory good quarter? very HVAC after still customers

Joseph Armes

that a a destocking strong been John, the we has saw I point. pretty with the that's not has and I think think so Yeah. since this been the driving the factor then I topic restocking, that sell-through not major our a year and and conversation in at mean of earlier then team's.

Jon Tanwanteng

And you integrated with in impact cases regards the the to half? into What prepare your of then, you country. supply to demand and chain on and operations outlook or are that just spiking that, COVID your have could how around doing terms for for second the you

James Perry

Yeah. when about bit whether Jon, see would we've as thing, that internally, that's financial seen inventory we us. bit to timely impact gaining the this that lose related there, at competitors able looked to our so we've can of because to from certainly and manner that move reason the is it's during capital an of corollary little in a times great be I it is them up not a we invest for deliver and we're ability to what those have supply a as uncertain which COVID-related, say been certainly our that predict One to sure to we necessarily be. our business our internal because businesses shorter we've wouldn't little to get to market to quarter this may minute of we Jon would the balance I need the of where and James. continue we have, we've folks I it's you a Yeah. have say, But what substantial anecdotes try sale. little to adding our inventory we these times ago, want be and working in lead would the which share Certainly, COVID pick have that kind customers told done a sheet sheet support the not a But do little. lot We've disruptions. with customers showing you we of COVID-related here strength and proud that do chain of issues due talked asked we've nothing to a may up and balance stock, be say well. product, to

Jon Tanwanteng

were cost margins Thank back cost come there performance think think the due If that on next reductions there Got then but quarter's demand that chemical a a there? the get you. we do quarter, should rolled of I base. was I there much this I you just or seasonally one-off normalized know cutting. expected, was And business, of new those to mentioned it. you than in down should the as as think you some stronger

James Perry

you Yeah, as the Jon. seasonality bit James. and the highlight as you we good but some of unpredictability. a was team segment, certainly This The board. Again certain reducing nice job cost. same-store Chemicals is pointed Products. Industrial job and But with a at done has done have a out, little I the certainly have across the mentioned businesses teams there, Specialty

of come reduce going some back low. of costs pick out an stay see of is to to that system, up think stay term as start expense the back. travel. those that It's you've I the Clearly, near continue release to some in things we may

you but could adjust the some that administrative of maybe we've at some in type in permanent potentially see to You cost I somewhat that short there creep learned thought the levels were back. other system. discretionary, But now some at level think

our speak. So or so necessarily new new that margin to base, I want that's to at say level wouldn't a we're

team very comfortable as for will I'll quarters a has we've committed with you, new on about of I maintaining level think of COVID. gotten and of the a calls, it take this think talked couple employment this I of but roll expenses. to result to the that remind last we couple out,

we've decisions. attrition not then had right-size we've COVID-related we've able as been but to made employment So operations,

are term. out Overall, are up down So I or and can are there. some expenses your long personnel the here of costs of that think we system, that there maintain

Jon Tanwanteng

a some you how it. it helpful. And on I half. quantify from pulled just, mentioned and impacted then Got the top That's much very business Can that that line? architectural the think quarter and you in second your both bottom of

James Perry

us, that make certainly is as would quarter and quantify half This wouldn't the up first help pointed for the first some obviously know We first quarter, almost the I second was that helped out tough. James. quarter Yeah. of we which it that. the helped

almost way we so caught the on on level. up earnings back level, a all So did an and consolidated

We end the saw in pull-forward. that some had second at it little started quarter. certainly, first our we So of seeing a the fiscal quarter,

this an of out third kind to bit the leads pocket of third we seasonality. that's that a air is quarter, point us top see quarter of just and So really on in we weakness potentially the why to where weakness, for want the

was so that expectations, but So an with certainly second strong. the on along speak we wouldn't that, beating to performance very impact HVAC quantify on it was the our quarter

Jon Tanwanteng

customers place obviously, came Can Okay. congrats Fair and in couple you're or were expecting finally that there? Was more of that quarters orders orders were and those? just in is of that where released and organic the And more describe business. what from enough. demand on kind next something kind landing delayed those that you the of then it

Joseph Armes

is Joe. This Yes, John.

stronger I areas. all will years that bought think would been combination in has couple than really and business market, educational a of end been of has categories, type if I down institutionals, or above. say other kind some Florida, of it's which a the ago we of you strong of the

been into a geographically. of it's and it's residential, worked more that's diversification spread been and has been of piece, paid really the our above So again that nicely and well. really, office educational it's institutional off this all mix But

and it's so our the and that John result team board been And bookings performing well. I to is think across growing, really pleased our the very nice strength a been see there with

Operator

This concludes the session today's call. question-and-answer and conference

day. pleasant disconnect may have participating lines. you Thank for and You your a

CSW Industrials (CSWI) 31 Oct 202021 Q2 Earnings call transcript